Reverse Mortgage Facts: Statistics You Need to Know

What is a Reverse Mortgage?

A reverse mortgage is a loan option that allows homeowners, typically 62 or older, to convert a portion of their home equity into cash. This loan doesn’t require monthly payments; instead, it gets repaid when the homeowner moves, sells the house, or passes away.

Starting January 1, 2025, HUD has increased the lending limit for the Home Equity Conversion Mortgage (HECM) program to $1,209,750. That’s nearly a $60,000 increase from last year. This means homeowners with higher-value properties can now access more funds through a reverse mortgage.

As home values continue to rise, what was once considered a “high-value home” is now closer to the median-priced home. This increase in the lending limit helps retirees achieve their financial goals.

Whether it’s paying off existing loans or getting some extra cash for retirement, a reverse mortgage can open up new opportunities for those who need it.

Eligibility for a HECM Reverse Mortgage

To qualify for a Home Equity Conversion Mortgage (HECM), homeowners generally need to meet a few basic criteria. If you’re over 62 years old, own a home with at least 50-55% equity, and use it as your primary residence, you’re likely eligible to apply. 

Here’s a closer look at the eligibility requirements:

Basic Eligibility Criteria

• Age: You must be at least 62 years old.
• Primary Residence: The home must be your primary residence, meaning you live there most of the year.
• Equity: You need to have at least 50-55% equity in your home to qualify.

Other Requirements

• Federal Debt: You can’t be behind on any federal debt, such as student loans or tax obligations.
• Home Condition: Your home needs to be in good condition with no significant repair issues.
• Eligible Property Type: The property must meet certain eligibility criteria, such as being a single-family home or a multi-unit property with one unit occupied by you.
• Financial Responsibility: You must have the resources to cover ongoing costs like property taxes, homeowners’ insurance, and HOA fees.
• Mortgage Insurance and Maintenance: If you take out a HECM, you’ll be required to pay mortgage insurance premiums and ensure that the property is well-maintained. If necessary, you may need a set-aside account to ensure timely payment for things like taxes and insurance.

Homeownership and Reverse Mortgage Trends

Homeownership remains strong among older Americans. In 2022, about 79% of people aged 65 and older owned their homes, with a median home equity of $250,000. This substantial equity has made reverse mortgages a popular option for many retirees looking to tap into their home value.

Since 1990, more than 1.3 million older homeowners have used the Home Equity Conversion Mortgage (HECM) program to access their home equity. However, the popularity of reverse mortgages has declined in recent years. In 2009, there were over 119,000 new HECM loans. By the first half of 2024, that number had dropped to just 19,894.

History of HECM Lending Limits

Over the years, HUD has adjusted the lending limits for Home Equity Conversion Mortgages (HECM) to keep up with rising home values. These increases have allowed older homeowners to access more of their home equity, making reverse mortgages a more viable option. Here’s a look at how the limits have changed over time and what it means for you:

2008 – 2017

In 2008, HUD set a national reverse mortgage lending limit of $417,000, making it easier for homeowners across the country to access these loans. In 2009, the Housing and Economic Recovery Act raised the limit to $625,500 to aid homeowners during the housing crisis. The limit stayed at $625,500 until 2017, when it increased slightly to $636,150, marking the start of regular annual increases.

2018–2020 

In 2018, the lending limit rose to $679,650, a $43,500 increase. The following year, it jumped by $46,875 to $726,525, which made it easier for homeowners to refinance their reverse mortgages. By 2020, the limit reached $756,600, a rise of $39,075, reflecting ongoing home value growth.

Larger Increases During the Pandemic

The COVID-19 pandemic caused home values to surge, which led to significant increases in reverse mortgage lending limits:

• 2021: The limit grew by $56,775 to $822,375.
• 2022: There was a record-setting jump of $148,425, bringing the limit to $970,800.

Recent Growth and Looking Ahead to 2025

In 2024, the FHA raised the reverse mortgage lending limit to $1,209,750, and it’s expected to remain at that level through 2025. This higher limit gives homeowners with higher-value properties more access to their home equity, allowing them to use a reverse mortgage to achieve financial goals like paying off existing loans or supplementing retirement income. 

Types of Reverse Mortgage Payments

When taking out a reverse mortgage, borrowers can choose from several payment options, each offering different ways to access their home equity. 

The Federal Housing Administration (FHA) insures Home Equity Conversion Mortgages (HECMs), which come with various payment structures, allowing flexibility based on individual needs. Here’s a breakdown of the different reverse mortgage payment options:

• Lump Sum: A single payment received when closing the loan.
• Term: Payments are made in equal monthly amounts for a fixed term, which the borrower chooses.
• Tenure: Payments are made in equal monthly amounts for the life of the loan as long as the borrower resides in the home.
• Line of Credit: Similar to a home equity line of credit (HELOC), this option lets borrowers take out money as needed until the line of credit is exhausted.

Around 95% of HECM borrowers choose a line of credit for greater flexibility in accessing funds.

Reverse Mortgage Borrower Demographics

Largest Group of Borrowers

• In FY2023, single women represented 39.4% of Home Equity Conversion Mortgage (HECM) borrowers.

Demographic Breakdown

Average Age

• The average age of reverse mortgage borrowers has remained steady at just under 75 years. Before applying, it’s crucial to understand the reverse mortgage age requirements to determine your eligibility.

Reverse Mortgages by State

The four states with the most reverse mortgages, which together represent nearly half of all HECM loans, are:

Primary Uses for Reverse Mortgages

Since its inception in 1990, over 1.3 million older homeowners have utilized HECM loans to access their home equity. Borrowers don’t use reverse mortgages for vacations or non-essential expenses. They typically use these loans to address immediate financial needs, such as paying off existing mortgages or other debts. 

When considering a lender, it’s important to shop around for the best interest rates and consider the appraised value of your home, as it plays a significant role in the loan amount. 

Additionally, homeowners should keep in mind that homeowners insurance is required as part of maintaining the property during the life of the loan. It’s also wise to review guidelines provided by the Consumer Financial Protection Bureau (CFPB) and the official gov sites for further details on reverse mortgages.

Bottom Line

The reverse mortgage loan offers homeowners a way to access their home equity, with the lending limit increasing to $1,209,750 in 2024, providing more financial flexibility. Single women represented the largest group of HECM borrowers in FY2023, and 66.2% of borrowers were White, 6.6% were Black, and 4.8% were Hispanic, with an average age of just under 75. 

However, borrowers should factor in closing costs like origination fees and remember that the loan balance must eventually be repaid, potentially leading to foreclosure if requirements aren’t met. Unlike a traditional mortgage, reverse mortgages do not require monthly payments, but the repayment comes due when the homeowner moves, sells the home, or passes away. It’s important to consider current interest rates and choose a reputable lender to avoid potential scams and make an informed financial decision.

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